The number of Brazilian companies that resort to arbitration is growing each day. This is mostly due to three factors: the growing number of Brazilian companies operating in other countries; Brazilian companies working jointly and/or in partnership with foreign companies; and the increasing popularity of this way to settle disputes. According to Raphael Zaroni, partner of Zaroni Advogados, a law firm that provides legal advice to Brazilian and foreign companies already doing business or starting operating in Brazil, with the escalation of the domestic economic crisis, more companies are delaying payments or failing to perform their obligations. As a result, the arising disputes are being taken to Brazilian and international arbitral tribunals.
About 20 years ago, arbitration was a practice almost inexistent in Brazil. Whenever the need for arbitration arose, Brazilian companies needed to submit their disputes to European and US tribunals. Most arbitrators and lawyers were also Europeans or Americans. This situation has been changing with the increasingly widespread work of Brazilian arbitrators and law firms.
According to Raphael Zaroni, the arbitral proceedings start from the moment the parties choose arbitration as a form of solving controversies and write up an arbitration clause. They can make this choice upon writing their agreement; therefore, long before any dispute arises. Otherwise, the parties may choose to set out an arbitration clause in a separate document. “Proceedings details depend on the rules of the arbitral tribunal or the rules agreed upon by the parties; but there are always some steps that are crucial such as how the decision to refer a dispute to arbitration should be communicated, as well as how arbitrators are appointed and how each side should present their arguments. Next, it is necessary to set the details for the hearing of parties and witnesses, analysis of evidences, and issue of arbitral award.”
Zaroni points out some of the key features of arbitration:
- It is easier to initiate – The parties seeking dispute resolution may agree to refer it to arbitration at any time, instead of taking an action to court. They can make this option upon executing an agreement or after a dispute arises, through an specific agreement.
- It is faster and more informal – Arbitrators are not subject to the same formal rules that govern judicial proceedings and endless appeals allowed by Brazilian Law. Besides, arbitral proceedings are more focused on the hearing, when each side presents evidence material to the controversy, witnesses are cross-examined and, then, closing statements are presented. This way, all the parties have a say not just in the choice of arbitral tribunal, arbitrators, and applicable rules and regulations, but also in the hearing itself.
- Arbitrators are experts – Since arbitration is an alternative and private form of dispute resolution, the arbitrators are chosen because the parties acknowledge their technical knowledge, expertise, and reliable reputation. Their decisions usually are technical and fast; and because arbitrators are experts in the subject matter of the dispute, it is possible to cut costs with outside experts and technical assistants. Therefore, an arbitral award issued by an arbitral tribunal delivers the same legal security as a decision made by a judge or court of law, but with a greater sense that justice has been made for all parties.
- It is confidential – Arbitration proceedings are confidential, while judicial proceedings are public. Therefore, people not directly involved do not have access to arbitral awards, or even know about the arbitral proceedings.
It is more suitable to foreign trade transactions – Whether because parties may choose applicable law and appropriate arbitral tribunals, expeditiousness of proceedings, or appointment of experts as arbitrators, companies are increasingly choosing arbitration as a way to settle international disputes with more satisfying results.